Thursday, June 7, 2007

Effect of NMW on Labour Market participation

-examine whether extention of NMW to 16-18 yr old's affect their participation in the labour market [10] (i know that it increases coz opportunity cost of studying has increased, but what's the second point?)

(Be careful: participation is not equivalent to getting job unemployment can mean participation)

National minimum wage increases incentive to work, rather than study. Subsitution effect.

However, in the long term the benefits of getting a job rather than studying are relatively minor.
The national minimum wage for 16-18 year olds is less than for those over 21. Therefore, the impact may be small.

If firms have to pay higher wages to 16-18 year olds they may offer less apprenticeships, therefore there are choices for 16 year olds to enter labour force, as a consequence they choose to remain in education rather than work.

wages isn't only factor affecting decision over whether to enter labour force.

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